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Gold has done really well in the past six years. Prices have risen about 20% per year since 2019, so by 2025, they will have almost tripled. A lot of people consider this asset as “defensive”; therefore, its success has come as a surprise.
But anyone who understands a lot about gold knows that it has never gone in a straight line. Gold is not a steady asset that goes up in value over time, like stocks or fixed deposits. Instead, it has long periods of big price increases followed by long periods of little change.
Gold returned to where it had been for more than seven years, from 2012 to 2019. It took more than 10 years to go back to how things were in 1980. Gold didn't go up or down, even though the world was going through a lot of changes throughout the 2010s.
It's hard to grasp gold since it evolves with time. Other things impact its price besides supply and demand. At the moment, five things stand out.
1. Central banks are buying more gold than ever before
Central banks have been buying gold, which is one of the key reasons why its price has gone up in the previous several years. Since 2022, they have bought more than 1,000 tonnes of gold every year. That's roughly twice as much as they bought in the 10 years before that.
The reason is strategic. A lot of new markets do not want to utilise the US dollar as much, especially since sanctions have made the dollar into a weapon. Gold is a good choice for a reserve since it is accepted all across the world, and no one government controls it.
Demand doesn't generally stay the same, no matter how much anything costs. Unlike most investors, central banks don't buy stocks depending on how they are moving. Instead, they buy stocks to keep their long-term finances healthy. This gives gold a strong base bid in markets all around the world.
2. Actual yields in the US are still a worry
Real rates in the US have been a problem for a long time, but central banks have done a lot to fix them. In the past, it was obvious to observe how gold prices moved: they went up when real yields went down and down when they went up.
Real yields are still high today, at around 1.98% (July 2025), which is one of the highest values we've seen in the recent few years.
It's interesting that gold has maintained high even if its yields are modest. It seems like central banks buying items and anxieties about geopolitics are making up for what is typically a big problem.
3. The economics of mining
You can also assess how well gold is doing by how much it costs to make it.
The “all-in sustaining cost” (AISC) that miners offer is the whole amount of money they require to keep their business going. The current gold price to AISC ratio is roughly 1.85 times, which is higher than the long-term average of 1.7 times.
It may not seem like a big deal, but in the world of commodities, it is.
This means that gold is worth more than it costs to make, which is an indication that prices have gone up too much because people are happy.
4. Stocks are just as enticing
Last but not the least, both gold and stocks are seeking to make money. You can tell how much people enjoy gold by how much it costs relative to other things, like the Sensex.
The gold-to-Sensex ratio is now 1.1X. This ratio used to illustrate where investors were placing their money, whether it was a lot on stocks or a lot on gold, no matter how high or low it was. There is no clear sign either way today — the balance is neutral.
The Big Picture
Putting these things together helps us to work out why gold has gone up so much and why things are so hard right now. Central banks have made a sturdy floor by buying a lot of things. But real rates and liquidity indicators show that things aren't generally excellent.
Gold has always been worth more than other things, as shown by the expenses of mining and the value ratios. There isn't a good argument for either gold or equities.
So, the easiest way to understand what's been going on with gold lately is to conceive of it as the result of two opposing forces in the world: central banks buying gold on purpose and rates and values making things harder.
Last Thought
When we look at gold's past, we can see that it doesn't always go in a straight line. There are times when the pricing stays the same for years after making a lot of money. This is because of structural forces throughout the world.
You might have a better idea of what's going on with gold now that you know what yields are, how mining works, how liquid gold is, and how stocks compare.
Chakravarthy V. is co-founder and executive director at Prime Wealth Finserv Pvt. Ltd.
English (US) ·